Home » New IRS rule kills the much-maligned ACA “family glitch”

New IRS rule kills the much-maligned ACA “family glitch”

What’s new: The Biden administration has issued a final rule closing what it calls the family bug under the Affordable Care Act (ACA).

The previous IRS rule prevented families from qualifying for ACA-subsidized health insurance if a member received coverage from their employer that was deemed affordable — even if the cost of coverage for the entire family was prohibitive. The employee-only definition did not take into account the fact that the cost of family-based coverage is typically much higher than employee-only coverage.

As a result, family members of workers – mainly low-income workers – were not eligible to receive premium and cost-sharing grants to purchase ACA market coverage.

The AMA has long sought the change, touting it as part of its broader coverage plan for the uninsured (PDF) and its vision for healthcare reform.

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Why it matters: The final regulation would close the loophole by extending eligibility for ACA financial assistance to family members of workers who are not offered affordable work-related family insurance.

“In April, I announced that we were proposing to fix this regulatory flaw,” President Joe Biden said in a statement. “Now the Treasury Department is finalizing this resolution to allow the law to work as Congress intended and reduce insurance costs for families across the country. Starting next month, Americans will be able to sign up to take advantage of this change. About 1 million Americans will either be insured under the new rule or will see their insurance become more affordable.”

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In 2020, the estimated average employee contribution for self-insurance was $1,243, noted James L. Madara, MD, executive vice president and CEO of AMA, in a 2021 letter to Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services, fixed (PDF).

In contrast, the estimated average contribution for family insurance was $5,588. More than half of the 5.1 million people affected by the family breakdown are children who are not eligible for the child health insurance program, according to Dr. Madara’s letter.

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Learn more: The Inflation Mitigation Act, passed earlier this year, took important steps to expand ACA premium tax credits. The law extends the improved and expanded ACA Premium Tax Credit, which supports the AMA, by three years. It is an advanceable, repayable loan that 13 million Americans have used to help them get health insurance through state and federal exchanges.

The law also extends improved subsidies for plans purchased on ACA marketplaces through 2025.

They expired at the end of this year. According to an analysis by the Kaiser Family Foundation, the end of the subsidy would have meant that the cost of insurance would have increased by 50% for about 13 million people.

Registration on the ACA Marketplace begins on November 1st. Discover three ways your patients can prepare for open enrollment now with HealthCare.gov.

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